2024Q2's revenue grew steadily, and adjusted net profit reached a new high. In 2024Q2, the “buy” rated company achieved operating income of 30.975 billion yuan (+11.6% yoy, +5.3% month-on-month), achieving a gross profit margin of 55.32% (+5.1pct yoy, +0.5pct month-on-month), adjusted net profit of 4.679 billion yuan (+73.7% yoy, +6.6% month-on-month), adjusted EBITDA of 6.344 billion yuan (YoY +47.0) %, +6.10% month-on-month). The sharp increase in performance was mainly due to rapid growth in online marketing service revenue and improvement in commercial monetization efficiency. We maintain our profit forecast for 2024-2026. We expect the company's net profit for 2024/2025/2026 to be 15.623/19.572/23.361 billion yuan, corresponding EPS of 3.6/4.5/5.4 yuan respectively, and the current stock price corresponding to PE is 11.3, 9.0, and 7.6 times, respectively. We are optimistic that the company's profitability will continue to increase and maintain a “buy” rating.
Online marketing service revenue is the engine of growth. Overseas losses have been reduced rapidly. Profitability continues to increase. Online marketing service revenue in 2024Q2 was 17.5 billion yuan (+22.1% year over year), accounting for 56.5% of revenue (+4.8pct year over year), mainly driven by intelligent marketing solutions and algorithm optimization to increase customer investment consumption. Revenue from other services was 4.158 billion yuan (+21.26% year over year), accounting for 13.5% of revenue (+1.1 pct year over year), and e-commerce GMV was 305.3 billion yuan (+14.99% year over year), mainly due to an increase in the number of active e-commerce paying users and retail merchants. The number of monthly active e-commerce buyers increased 14.1% year over year to 0.131 billion, and the monthly activity penetration rate reached a record high of 18.9%. Live streaming revenue was 9.3 billion yuan (-6.68% YoY), accounting for 30% of revenue (-5.9pct YoY). 2024Q2 achieved overseas revenue of 1.1 billion yuan (+141.4% year over year), and operating loss decreased by 64.5% year over year to 0.277 billion yuan. The sales expense ratio was 32.4% (+1.29pct year over year), and the R&D expense ratio was 9.1% (YoY -2.32pct). Increased gross margin combined with cost-side optimization, and adjusted net profit margin increased 5.40pct to 15.1% year over year.
High-quality growth on the traffic side, AI enabled improvements in content creation quality and commercialization efficiency, opening up space for growth. The average DAU for the 2024Q2 platform was 0.395 billion (+5.13% YoY, +0.38%), the average MAU was 0.692 billion (+2.75% YoY, -0.80%), and the average revenue from online marketing services in a single day was 44.3 yuan (+15.97% YoY, +4.73%), and user monetization efficiency improved markedly. The company's AI investment gradually blossomed. 2024Q2 launched a large-scale video model, Keling AI, and the Wenshengtu model to effectively improve commercial monetization efficiency. The daily peak value of 2024Q2 AIGC marketing materials from marketing customers reached 20 million yuan. The platform's commercial ecosystem continues to prosper, and the superposition of AI is empowered to improve commercial monetization efficiency and help open up space for growth.
Risk warning: advertising commercialization is less efficient than expected, user growth is slowing down, competition in the short video industry is intensifying, etc.